I can’t afford my life insurance. What are my options?

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Q. I have a whole life policy worth $500,000 and I used to pay the premiums annually. Now I’ve lost my job and I know I will have a premium coming up soon, but it’s money I don’t have to spend. I don’t want to lose the policy. How can I get the insurance company to help me out?
— Unemployed

A. We’re sorry to hear about your job loss.

But there is good news on your insurance policy.

First, realize that every policy is different so you should read yours to see the specific provisions.

For this, we’re going to assume you have a traditional whole life policy, which would give you several options.

You can go from annual premiums to monthly, said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

He said that would immediately take the pressure off.

Then, if you share in profits through dividends, you can use dividends to offset premiums, Gaelick said. Depending on how long you’ve had this policy, that could sustain the premiums for some time.

If dividends are not enough to offset premiums, you could use whatever dividends are available and then surrender paid-up additions.

“Again, depending on the exact type of policy you have and how it was designed, your dividends could be buying extra death benefit above your original amount,” Gaelick said. “That extra insurance has a cash value. That cash value can be used to pay premiums, but the death benefit will reduce — never below the original amount — as will the cash value, but it can help sustain the policy, which is your goal.”

You should also look at automatic premium loans, Gaelick said. The insurance company will pay your premium and set up a loan against your cash values. In essence, your policy becomes collateral, he said.

Reach out to your advisor or the insurance company to go over all your options.

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This story was originally published on Dec. 1, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.